21st Apr 2016 16:15
LONDON (Alliance News) - London shares ended lower Thursday, with the European Central Bank keeping unchanged its key interest rates after its monetary policy meeting, following the substantial easing package in March, but leaving the door open for further measures to stimulate the economy.
The FTSE 100 ended down 0.5%, or 28.82 points, at 6,381.44, feeling a slight drag from stocks going ex-dividend. The blue-chip index had opened at a 2016 high of 6,427.32 points, its highest level since early December, but declined shortly afterwards.
In Paris, the CAC 40 fell 0.2% and the DAX 30 in Frankfurt rose 0.1%.
"Having pushed into new highs for 2016, inaction from the European Central Bank and no lasting movement in the euro left stock markets with nowhere to go," said CMC analyst Jasper Lawler.
The 25-member Governing Council didn't announce new measures, as analysts widely expected, following the significant easing package launched in the wake of its previous meeting on March 10. The central bank left its main refinancing rate at 0.0%, the marginal lending facility rate at 0.25% and the deposit rate at -0.4%. The asset purchase programme was left unchanged at EUR80 billion per monthly.
ECB President Mario Draghi reiterated in his press conference following the monetary policy decision that interest rates will likely remain at "present or lower levels for an extended time".
"Following our comprehensive package of decisions taken in early March, broad financing conditions in the euro area have improved," Draghi said. "The pass-through of the monetary policy stimulus to firms and households, notably through the banking system, is strengthening. However, global uncertainties persist," he said.
Looking forward, Draghi said "it is essential to preserve an appropriate degree of monetary accommodation as long as needed," in order to underpin the economic recovery of the eurozone and accelerate the return of inflation to levels below, but close to, the central bank's 2.0% target.
Draghi said the ECB will use "all the instruments available within its mandate" should it become necessary to achieve its inflation mandate. Asked by reporters whether the Governing Council discussed at the meeting more aggressive easing tools such as 'helicopter money', Draghi said they didn't, though he didn't rule it out.
Helicopter money refers to a radical form of monetary policy that involves printing large sums of money and distributing it to the public in order to stimulate the economy, like a helicopter scattering euro notes to a crowd.
The euro initially rose heavily after the no-change monetary policy decision, touching an intraday high of USD1.1397. However, during Draghi's press conference, the single currency went back to where it was prior to the announcement. The euro was quoted at USD1.1296 at the London equities close, compared to USD1.1327 at the close Wednesday.
Oil prices gave back some of their gains made Wednesday when the US Energy Information Administration said US crude oil inventories rose by less than expected. Brent had hit its highest level since November at USD46.10 a barrel in early trade Thursday, but it was quoted at USD45.13 a barrel at the London equities close, still higher than the USD44.39 at the same time Wednesday.
Gold was quoted at USD1,251.76 an ounce at the close Thursday, compared to USD1,252.92 an ounce on Wednesday.
A report from the Office for National Statistics showed UK retail sales volume slid 1.3% in March after February's 0.5% fall, whilst economists expected a 0.1% drop. On a yearly basis, retail sales growth fell unexpectedly to 2.7% in March from 3.6% in prior month. Sales were expected to expand 4.4% on an annual basis.
Excluding auto fuel, retail sales volume declined 1.6%, following a 0.3% drop in February. Economists had forecast a marginal 0.3% decrease. Year-on-year, retail sales excluding auto fuel rose 2.7%, slower than economist expectations of 4.4% growth, versus the previous 3.8% rise.
The pound was quoted at USD1.4330 at the close Thursday, against USD1.4381 at the same time Wednesday.
Data from the US Labor Department said first-time claims for US unemployment benefits unexpectedly decreased to 247,000, from 253,000 the previous week. Economists had expected claims to rise to 265,000. Continuing claims, a reading on the number of people receiving ongoing unemployment assistance, also fell to 2.13 million in the week ended April 9, with economists expecting a rise to 2.171 million from the previous week's 2.176 million.
Meanwhile, the US Conference Board said its leading economic index rose by 0.2% in March after edging down by a revised 0.1% in February. Economists had expected the index to climb by 0.5% compared to the 0.1% uptick originally reported for the previous month.
Stocks in New York were mixed at the London close, with the Dow 30 down 0.3%, as well as the S&P 500, and the Nasdaq Composite flat%.
Still in the US corporate calendar, Google parent company Alphabet, technology giant Microsoft, financial services company Visa and coffeehouse chain Starbucks release first-quarter updates after the US close.
On the London Stock Exchange, pay-television provider Sky dropped 5.1% as analysts failed to be impressed by the group's update, even though Sky said operating profit rose 12% in the first nine months of its financial year, as revenue growth was driven by strong customer additions during the third quarter.
Analysts at Liberum said: "Our main concern is with Sky's long term profitability. It will never reach the heights to justify the valuation as there will be continuing pressures from programming cost inflation." Barclays raised concerns about the upcoming German football television rights auction, noting that "Sky Deutschland cannot get exclusivity, which is a negative development."
Meanwhile, Haitong Research took issue with Sky's lack of visibility on its numbers: "Sky should report full financials or none at all, because only selective disclosure is likely to mislead investors."
Anglo American ended down 1.0% even though it said production was in line with its expectations in the first quarter of 2016 as the miner reiterated its guidance for the full year. Anglo, which is in the process of narrowing its focus to diamonds, platinum and copper, said the first-quarter production results reflect the major restructuring programme under way and the company's ongoing efficiency and cost-reduction strategy.
The FTSE 100 index was hit by stocks going ex-dividend, meaning new buyers no longer qualify for certain dividend payments. Outsourcer Capita ended down 2.7%, defence contractor BAE Systems down 2.3% and medical devices company Smith & Nephew down 0.9%.
Equipment rental company Ashtead Group ended the best blue-chip performer, up 3.7%, after saying it anticipates its full-year results will be at the top end of market expectations. The group said it has continued to trade well in the fourth quarter to the end of April and now expects its final results to be at the upper end of analyst consensus.
Tesco rose 0.8% after Fitch Ratings revised its outlook on the supermarket chain up to Stable from Negative and affirmed its long-term issuer default rating and senior unsecured rating at BB+. Fitch said it also affirmed the short-term issuer default rating and short-term debt ratings at B. Neither BB+ for long-term debt nor B for short-term debt are investment grade.
The FTSE 250 ended down 0.2%, or 38.54 points, at 16,979.44 and the AIM All-Share ended up 0.1%, or 0.44 points, at 733.80.
Aerospace and defence components manufacturer Senior ended as the best mid-cap performer, up 6.2%. The group said it anticipates better aerospace sales in the second half but said its Flexonics arm continues to face a challenging market, hit by difficult conditions in truck and off-highway markets and the industrial sector.
Shares in Acacia Mining rose 5.4%. The miner said its profit rose in the first quarter of 2016 after the company countered lower gold prices by increasing production and improving its margin through cost reductions. Acacia said revenue in the first quarter of 2016 amounted to USD221.0 million, whilst earnings before interest, tax, depreciation and amortisation totalled USD66.0 million. That revenue was 3% higher than the previous quarter thanks to a rise in gold sales.
Engineer Smiths Group ended up 4.3% after striking a USD710.0 million deal to acquire the US's Morpho Detection from French engineering group Safran. Morpho is a California-based detection and security technology company, Smiths said, and will be merged into the UK-listed company's existing Smiths Detection business.
In the UK corporate calendar Friday, Immunodiagnostic Systems Holdings, which provides clinical laboratory diagnostic services, and specialist currency manager Record release trading statements.
In the economic calendar, Japan's Nikkei manufacturing Purchasing Manager's Index is due at 200 BST, while the country's tertiary industry index is due at 0530 BST. China's MNI business sentiment indicator is due at 0245 BST.
France's Markit manufacturing, service and composite PMIs are due at 0800 BST, while the same from Germany and the eurozone are due at 0830 BST and 0900 BST, respectively. Later in the day, US Markit manufacturing PMI is due at 1445 BST, while the Baker Hughes US oil rig count is due at 1800 BST.
By Daniel Ruiz; [email protected]
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